Asian shares pulled back from a five-month high and the dollar edged up after recent heavy losses as markets braced themselves for US jobs data that could decide whether the Federal Reserve will start withdrawing its stimulus this year. Investors were reluctant to make aggressive bets after US stocks ended little changed, partly on concerns that equities have become overpriced after the S&P 500 index’s run to record highs last week.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2 per cent, dropping from a five-month peak. Technical charts indicated it remained in "overbought" territory, indicating there could be a further retreat. Tokyo's Nikkei share average inched up 0.1 per cent in light trade, while Australia's S&P/ASX 200 rose 0.4 per cent to a five-year high for a third day in a row and logged a sixth day of gains, its longest such run since July.
Financial bookmakers expected major European indexes to open flat to modestly weaker. Analysts polled by Reuters expect US nonfarm payrolls to have increased by 180,000 in September, with the jobless rate steady at 7.3 per cent. The data was delayed from October 4th by the 16-day US government shutdown. Many analysts expect the US central bank to maintain its quantitative easing (QE) given the as-yet-unknown economic impact of the shutdown and the possibility of another bitter budget fight early next year. A strong employment report, though, could challenge that thinking.
“The common view in the market is that US is essentially trapped in QE,” said Andrew Quin, research strategy coordinator at Patersons Securities in Perth. “So at least until new debt ceiling negotiations get agreed probably in February, we doubt they are going to do too much with QE between then and now.”
A senior Fed official said it would be “tough” for the Fed to have sufficient confidence in the strength of the US recovery by the time of its meeting in December to start reducing its $85 billion-per-month bond-buying programme.
The dollar was up 0.1 per cent at $1.3665 to the euro, off an eight-month low of $1.3704 marked on Friday, and gained by similar margin against the yen, at 98.31 yen, adding to Monday’s 0.4 per cent bounce. Against a basket of major currencies, the dollar added 0.1 per cent.
“A (jobs) reading anywhere in the 160,000 to 190,000 range would probably be fairly neutral with respect to near-term U.S. dollar direction given the data pre-dates any impact from the October shutdown,” BNP Paribas analysts wrote in a note. “We remain short euro/dollar and sterling/dollar heading into the release, looking for gradual improvement in U.S. data,” they said.
US crude prices slipped 0.4 per cent to below $99 a barrel, hitting a near four-month low and adding to the previous session’s 1.6 per cent decline. Gold softened a touch to around $1,313.6 an ounce.
